HC Master's Order In Arbitration Execution Treated As Commercial Division Order, Not Appealable: Madras High Court

The Madras High Court has recently held that when a Master passes an order in execution of an arbitral award arising out of a commercial dispute, the order is equivalent to one passed by the Commercial Division of the High Court itself and cannot be challenged again before the Commercial Division.

"When a Master passes an order in an Execution Petition filed under Section 36 of the Arbitration Act, the said order is equivalent to the order of the Commercial Division of the High Court and there cannot be an appeal filed again before the Commercial Division. To reiterate the Master acts as a delegate of the Court when he discharges judicial act under the Original Side Rules and not when he discharges judicial act under the Commercial Courts Act or on a Commercial dispute adjudicated under the Arbitration and Conciliation Act, 1996. This view has been strengthened by the subsequent amendment to the procedure when Execution Petitions on a commercial dispute are brought directly before the Commercial Division and not before the Master.,” the Court held.

A Division Bench comprising Justice C.V. Karthikeyan and Justice K. Kumaresh Babu set aside a Single Judge's order that had allowed Kamarajar Port Limited to challenge an execution order passed by the Master on the original side of the High Court.

The execution order had directed Kamarajar Port to implement an arbitral award in favour of Ennore Tank Terminals Private Limited by approving the 2014 Detailed Project Report, recognising its right to a 330-meter expansion, and allotting additional land.

The Bench held that the powers under the Code of Civil Procedure can only be used to enforce arbitral awards and not to obstruct them.

“The arms of the Code of Civil Procedure could be used to ensure that the award is executed. They are not meant to stifle execution,” the Court observed.

The dispute arose from a licence agreement dated November 10, 2004, under which Ennore Tank Terminals was permitted to build, operate and transfer the Marine Liquid Terminal-I at Ennore Port. Disputes later arose over its claim for expansion rights under the agreement.

In 2014, Ennore Tank Terminals submitted a Detailed Project Report seeking expansion of the terminal. Kamarajar Port rejected the proposal, leading to arbitration.

An arbitral award dated September 28, 2017 upheld Ennore Tank Terminals' right to a 330-metre expansion. Neither side challenged the award and it attained finality.

Ennore Tank Terminals later alleged that Kamarajar Port was attempting to allot Marine Liquid Terminal-II to another consortium. It then moved the High Court seeking interim protection and also filed execution proceedings under Section 36 of the Arbitration and Conciliation Act before the Master.

On February 8, 2019, the Master directed Kamarajar Port to implement the award within six weeks. The directions included approval of the 2014 DPR, allotment of the 330-meter expansion area, 300 sq. meters for a raised area for truck drivers, and 3.75 acres for installation of an additional surcharge area.

Kamarajar Port challenged the order before a Single Judge. Ennore Tank Terminals objected to the maintainability of the challenge.

The Single Judge held that once an arbitral award becomes enforceable as a decree, remedies available under the CPC could also be invoked during execution proceedings.

Ennore Tank Terminals then filed appeals before the Division Bench, arguing that the Arbitration and Conciliation Act is a self-contained code that limits judicial intervention and appeals under Sections 5 and 37 of the Act.

Rejecting Kamarajar Port's contention that CPC remedies remained available during execution, the Division Bench said the Master, while dealing with the execution of arbitral awards arising from commercial disputes, acts as a substitute for the Commercial Division and not merely as a delegate of the Court.

The bench further held that the Single Judge wrongly treated execution proceedings as falling outside the arbitration framework. It said permitting an additional appellate layer would undermine the objective of speedy resolution of commercial disputes.

“We take these appeals as an opportunity to correct the position of law and hold that appeals filed during the course of Execution of an Arbitration Award arising out of a commercial dispute are not appealable”, the Bench held.

Accordingly, the Court allowed the appeals, set aside the Single Judge's order dated August 19, 2019, and held that Kamarajar Port's challenge was not maintainable. The execution proceedings were remanded for continuation. 

For Appellant (Ennore Tank Terminals Private Limited): Advocates Vijay Narayan (Senior Counsel), K.G. Gowtham Kumar.

For Respondent (Kamarajar Port Limited): Advocates S. Parthasarathy (Senior Counsel), Krishna Ravindran.